The big sale

| Updated on March 09, 2018 Published on March 27, 2015

The spectrum auction was a financial success, but the Centre needs to do much more if it is serious about bridging the digital divide

The Centre has wasted no time in patting itself on the back for raising ₹1.10 lakh crore from the sale of spectrum through an open auction. But the primary objective of selling spectrum is, of course, not to fill the coffers of the national exchequer or close the fiscal gap — it is about bridging the digital divide. The real benefits will be reaped only when the sold spectrum is put to actual use by telecom companies to offer high quality and innovative telecom services, both voice and data, to every citizen at affordable rates. Auctioning spectrum is only the first step in achieving this target.

The Centre must waste no time in taking other measures. First, it must ensure cheaper smartphones and internet access devices. A large number of mobile subscribers still use feature phones that are not suited for data services. Rationalising duties and incentivising local manufacturing will help phone-makers bring down the cost of smartphones. In 2004, the TRAI had proposed fiscal incentives to broadband users. The Centre trashed it then because it wasn’t prepared to loosen its purse strings. Now, having received record earnings from selling spectrum, perhaps the Centre could review these recommendations. Second, the Centre should ensure that broadband services are affordable. Tariffs are fixed by telecom service providers and therefore the Centre must help the operators keep their cost structure at reasonable levels. Telecom companies pay 30 per cent of their revenues in taxes and levies, and any reduction in this will help them pass on the savings to the consumers. One option could be to phase out the annual licence fee paid in the form of revenue share. Third, and finally, the department of telecommunications should put in place the policy for spectrum trading, sharing, and mergers and acquisitions.

Spectrum trading will help operators to access more spectrum. And the more spectrum an operator holds, the more telephone conversations and data traffic can be carried over the network. An exit policy will help struggling operators sell out to players who want to stay invested for the long term. There are a number of operators struggling to stay afloat but unable to sell out due to lack of clarity in the mergers and acquisitions policy. This situation is bad not only for telecom companies but adversely impacts the overall industry, as spectrum and infrastructure resources could have been better utilised had some operators been allowed to exit. If the Centre is able to do all of this, it will be justified in celebrating what it garnered in the spectrum auction.

Published on March 27, 2015
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